Energy Snapshot: Current State of the Greek Energy Market

This article by Sotirios Douklias at KG Law Firm gives an overview of the current state of the Greek energy market.

Renewable energy

Recent developments in the renewable energy sector include the following:

• A fee of €1,000 per megawatts (MW) has been imposed on holders of renewable energy source (RES) production licences for the right to retain such licences. The application of this retention fee commences between one and six years after the licence issue date (depending on the type of project and licence issue date) upon submission of a bank guarantee letter relating to the connection terms offer.
• On accepting a connection terms offer, producers must submit a guarantee letter, which must remain valid until commencement of the project trial operation period. The guarantee letter amount is determined by the overall capacity of the project; it is forfeited in favour of the RES special account if the connection agreement is not signed within the validity period of the connection terms offer.
• The Peloponnese region network has been characterised as 'saturated'; projects of any type can no longer be developed in this area.
• The Ministry of Environment, Energy and Climate Change may institute a management fee for the examination of applications for the grant of a connection terms offer.
• The medium-term fiscal strategy framework instituted a special extraordinary 'solidarity' contribution imposed on RES producers, which had retroactive effect as of July 2012. This contribution constitutes a percentage on the pre-value added tax sale price of electricity produced by each producer, and varies – depending on the technology and connection date – between 10% and 42% of this price.
• Due to the longstanding deficit in the RES special account, significant delays in payment of RES producers have arisen; several new measures have been introduced to help to address this deficit.
• The ministry is considering extending the duration of power purchase agreements, while reducing the respective feed-in tariffs (FITs). This would involve the renegotiation of such agreements. The reduction in question would depend on various factors (eg, the level of the FIT, equipment costs, whether the project received a subsidy). While the ministry is seeking to incentivise producers into participating in renegotiations voluntarily, measures are being considered which would make it unfavourable for producers not to renegotiate their power purchase agreements.
• As a result of the above-mentioned reduction of the FITs and subsequent changes in producers' income, the ministry and Greek banks are working closely to ease the terms of bank loans used by RES producers for their projects, by extending loan durations and reducing monthly payments.

Photovoltaics

Developments in the photovoltaics sector include the following:

• The FITs for photovoltaics projects are linked to their connection date. The existing FIT for a project connection is €171.90 per megawatt hour (MWh); this amount will decrease every six months (to €164.16, €156.78 and €149.72/MWh) until 2015, whereby the FIT will be a function of the system marginal price. In addition, the minister may decrease the FIT on an ad hoc basis by issuing a ministerial decision.
• An indefinite blanket suspension currently applies to photovoltaics projects, as instituted by the ministry. No new applications for such projects are being accepted, pending applications are not being reviewed and connection terms of offer are not being offered for pending projects. A moratorium has also been imposed on the signing of connection agreements and power purchase agreements until the end of 2013.
• The special extraordinary solidarity contribution for photovoltaics projects ranges from 25% to 42% of the price of electricity.
• The obligation to pay the production licence retention fee commences one year from the issue of a new licence.

Other RES (non-photovoltaics) projects

Developments relating to other RES projects include the following:

• The FITs for non-photovoltaics RES projects will be linked to the project's connection date (excluding the connection of wind and hydro projects, for which the FIT is currently €87.85/MWh). Such FITs will no longer be adjusted annually on the consumer price index.
• As is the case with photovoltaics, the minister will be able to decrease the FIT on an ad hoc basis by issuing a ministerial decision.
• The special extraordinary solidarity contribution for non-photovoltaics RES projects is 10% of the price of electricity.
• The obligation to pay the production licence retention fee begins three years from issue of a new licence.

Conventional energy

Developments in the conventional energy sector include the following:

• The electricity market is structured as a mandatory pool, but the introduction of capacity auctions will act as a transitional mechanism until the market functions on the basis of bilateral contracts in order to harmonise the Greek electricity market with the European target model.
• Power producers stand to receive increased income due to a doubling of the price of capacity availability tickets (from €45,000/MW to €89,000/MW). In addition, and despite initial efforts for its abolition, the cost-recovery mechanism of the electricity market will remain in force.
• Older Public Power Corporation lignite units (with a total capacity of approximately 1,300MW) are to be withdrawn from operation, as per relevant legislation.

Hydrocarbons

Developments in the hydrocarbons sector include the following:

• Norwegian company PGS has concluded seismic research in the Ionian Sea and southern Crete regions. The data is being analysed and will be presented to interested parties in order to enable them to prepare for a new round of tenders for research and exploration in such areas, which is scheduled to take place in 2014.
• The open-door tender process, which began in January 2012, closed in June 2013; the areas of Ioannina, Katakolo and the Patras Gulf will be awarded to the highest bidders in order for the concessionaires to commence exploration activities.
• Hellenic Hydrocarbon Resources Management SA, instituted with Law 4001/2011 and formed with Presidential Decree 14/2012, is to be fully staffed, so that it may become operational.

For further information on this topic please contact Sotirios Douklias at KG Law Firm by telephone (+30 210 8171 500), fax (+30 210 6856 6578) or email (s.douklias@kglawfirm.gr).

This article was originally published in the Energy & Natural Resources Newsletter of the International Law Office - www.internationallawoffice.com.